Patent Creation and U.S. Inventiveness

In the midst of a weak recovery from a particularly severe recession, many people are wondering whether the United States is in a state of decline, lacking the dynamism it once had. In terms of inventiveness such as patent creation the U.S. still ranks high. In other measures not so much.

Some argue that U.S. inventive output is flagging in the face of other related challenges, including global competition, increasing technological complexity, and weak public sector support relative to other countries. In a Brookings Institution report authored by Jonathan Rothwell, José Lobo, Deborah Strumsky, and Mark Muro, the United States still ranks very high globally on a number of important measures of innovative capacity, though other developed countries have caught up or overtaken it.

One study rates the United States fourth in the world in terms of innovative capacity but notes that it ranks near the bottom on changes over the previous ten years in the underlying variables. The authors say that when using internationally-oriented patent applications filed from 2000 to 2010 per resident, the United States ranks somewhat lower at ninth, and it is just 13th on science and engineering publications per capita.

More positively, the United States ranks third on GDP per worker, behind only Luxembourg and oil-rich Norway. On R&D spending per capita, it ranks second, behind only Finland. Finally, according to the Leiden Ranking (from Leiden University in the Netherlands), all ten of the world’s top research universities are in the United States and 43 of the top 50, led by MIT, Princeton, Harvard, and Stanford. All of these factors play a role in American innovation.

The focus of the Brookings report is on inventive activity, which yields enormous benefits to society that go well beyond the gains from inventors and producers. One measure of inventive activity—the number of patents granted per person—has been increasing in the U. S., alongside research and development. The Brookings authors add that some scholars have even suggested that too many patents have been granted and attribute an increase to the declining rigor of approval standards. Yet, there is a large body of compelling evidence showing that most patents do actually represent valuable inventions, especially “high quality” patents—meaning those that are highly cited or those that advance more intellectual property claims.

Despite wide variation in value, economists have calculated that the average patent is worth over half a million dollars in direct market value (and considerably more in social value as the technology and its ideas become diffused). These estimates are consistent with recent patent sales reported in the media from Eastman Kodak, Motorola, Nortel, and Nokia, which have ranged $477,000 to $760,000 per patent, and even single patents from relatively unknown companies list patent prices at an online website for $1 million.

In any case, there is evidence that patent value is increasing. One indication is that scientific and technical research is increasingly collaborative in the United States and globally, and this appears to be leading to more valuable patents and publications. Another is that corporate income from manufacturing sector royalties—which come largely from the licensing of patents—increased by 89 percent from 1994 to 2009, almost double the growth rate of patents granted to domestic inventors.

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